Dive Brief:
- Teladoc Health reported mixed first-quarter results Thursday, with earnings dragged down by lagging growth in its direct-to-consumer mental health business BetterHelp.
- BetterHelp revenue declined 4% year over year, as the virtual care giant struggled to retain paying users. Still, Teladoc beat Wall Street expectations on revenue of $646 million and a net loss of $82 million.
- The virtual care giant said it expects to appoint a new chief executive by the end of the year, after announcing the abrupt departure of long-time CEO Jason Gorevic earlier this month.
Dive Insight:
Teladoc has struggled to sustain momentum and drive customers to its platforms after the COVID-19 pandemic spurred growth in virtual care companies. The company has posted repeated losses — its net loss in the first quarter increased by 18% compared to the prior year period.
Late last year, the company launched an “operational review” in a bid to boost its bottom line following historic net losses in early 2023. It also said it was looking for a new CEO, ousting Gorevic, who had been chief executive since 2009.
Mala Murthy, Teladoc’s CFO and acting CEO, said during the earnings call Thursday the search for Gorevic’s successor is “well underway.”
“Teladoc is in a time of transition,” Murthy said. “As part of that evolution, the board of directors decided it was time to look for a new leader of our company, someone to help us write the next chapter in our growth story.”
Executives said they were “laser focused” on improving Teladoc’s trajectory. However, they acknowledged existing stumbling blocks to growth, particularly the flagging performance of BetterHelp, which has struggled to balance costs and margins.
The number of paying users for BetterHelp dropped 11% year over year and total revenues for the segment sank 4% in the quarter. Teladoc now expects BetterHelp sales to shrink 4% to 8% in the second quarter compared to the same period last year.
“I am not satisfied with our BetterHelp segment margins,” Murthy said.
Teladoc executives said international expansion of BetterHelp could provide key growth for the segment, which already has a presence in the U.K., Canada and Australia, according to Murthy.
But analysts were largely unimpressed with what they said was an unclear strategy.
“Many of the questions we had going into print remain unanswered to us coming out, and, despite depressed valuation, we don't have enough visibility on how BetterHelp can improve its growth and profitability as [out-of-U.S.] expansion efforts have yet to occur,” Leerink analysts wrote in a note Thursday.
“We believe coming out of 1Q24, the question remains how [Teladoc] can reinvigorate BetterHelp growth,” TD Cowen analysts said.
Teladoc’s results were boosted by growth in its integrated care segment, which includes its business-to-business offerings. Revenue grew by 8% year over year, sustained by member growth in its integrated care and chronic care units.
Despite growth in its integrated care segment, Teladoc left its full-year and second-quarter guidance unchanged.
The company expects revenue of between $635 million to $660 million during the second quarter, and $2.6 billion to $2.7 billion for all of 2024.
